Hunt-Led Group Sues Texas Regulator Over Failed Oncor Buyoutby and
Texas regulators accused of erring in setting merger terms
Hunt group withdrew bid for Oncor in May over state conditions
Hunt Consolidated Inc. and a group of creditors that sought to buy Energy Future Holdings Corp.’s Oncor Electric Delivery Co. utility are suing Texas regulators who attached conditions to their merger that caused the deal to unravel.
In a lawsuit dated June 17, the Hunt-led group said the Public Utility Commission of Texas erred in setting conditions that may have required the buyers to share potential tax savings with the utility’s ratepayers. The would-be buyers are seeking to reverse the agency’s March 24 order, according to the suit, which was filed in Travis County, Texas, and served on the commission on Thursday.
The lawsuit comes just a month after the Hunt group withdrew its application to buy Oncor, Texas’s biggest transmission operator, saying some of the buyers wouldn’t sign off on the terms set by the state commission. It may threaten to undermine any other offers the utility is entertaining from potential buyers. Power generator NextEra Energy Inc. expressed interest in taking over Oncor as the deal with Hunt appeared to be faltering, two people familiar with the talks said in May.
“If Hunt is successful in court, there’s a chance they would get back to the negotiating table with the debtors and move forward on a deal to buy Oncor,” Julia Winters, a litigation analyst for Bloomberg Intelligence in New York, said by phone on Thursday. “It would be a lot easier to move forward with the plan that was already on the table and approved by the bankruptcy court.”
The sale of Oncor, the regulated utility unit of Energy Future, has been seen as key to Energy Future’s emergence from bankruptcy after two years of restructuring almost $50 billion in debt. Hunt’s complex transaction had called for investors to raise more than $12 billion and the cancellation of billions in debt, according to bankruptcy court documents.
“Businesses often file appeals within the court system to preserve their legal rights going forward,” Hunt Consolidated spokeswoman Jeanne Phillips said in an e-mail responding to questions on the lawsuit. “That is the intent here.” Energy Future spokesman Allan Koenig declined to comment.
Hunt’s ability to salvage its bid may largely depend on how long the legal process drags out, Winters said.
“If Hunt were successful before the debtors get very far on a new plan, then I wouldn’t be surprised to see Hunt back at the table,” she said. “That said, for all I know, there’s somebody else like NextEra who’s already got something cooking. Hunt may be too late.”
The state commission has asked that the attorney general represent it in the lawsuit, agency spokesman Terry Hadley said in a telephone interview. “What makes this unusual is they are asking for some type of relief after they backed out of the original application,” he said.
The case is Ovation Acquisition II LLC v. Public Utility Commission of Texas,
D-1-GN-16-002619, Travis County District Court (Austin).